Evans v. Evans

• Citation: 820 A.2d 394
• Decision Date: 06 September 2001
• Docket Number: No. CS95-04043.,CS95-04043.
• Parties: In Re the Matter of: Donna T. EVANS, v. Jacob B. EVANS.
• Court: Family Court of Delaware

820 A.2d 394

In Re the Matter of: Donna T. EVANS¹, v. Jacob B. EVANS.

No. CS95-04043.

Family Court of Delaware, Sussex County.

Submitted: April 25, 2000.

Decided: September 6, 2001.

Mary R. Schrider, Esquire, Tunnell & Raysor, Georgetown, DE, counsel for wife.

George G. Strott, Esquire, Law Firm of George G. Strott, Jr., Salisbury, MD, counsel for husband.

HENRIKSEN, J.

Pursuant to a Rule To Show Cause petition filed on April 25, 2000 by Donna T. Evans ("wife") against Jacob B. Evans ("husband"), the Court is asked to determine whether husband's disability pension from the State of Maryland, which went into effect following the parties' divorce, should be subject to the parties' ancillary Stipulation and Order. The Stipulation and Order awarded the wife an interest in the husband's pension and/or retirement benefits from the State of Maryland and required the parties to enter into a Qualified Domestic Relations Order (QDRO). The QDRO applied a Cooper formula with a fifty percent (50%) multiplier. For the reasons set forth hereafter, the Court determines that husband's State of Maryland disability pension was a property interest acquired during the marriage and, therefore, is subject to the equitable division of the Court and the ancillary Agreement and Order of the parties. As such, the wife's interest in the husband's post-divorce triggered disability pension is subject to a QDRO or such other Order as complies with the State of Maryland Pension Fund. However, the value of the allowance husband receives under his disability plan may not necessarily be the same as the value of the allowance he may have received under his service retirement plan which was based predominantly on age and length of service. Therefore, it will be necessary for the parties to consider the difference of these plans and adjust the QDRO or other similar acceptable form of pension allocation Order accordingly. If the parties are unable to reach such an agreement, they will need to seek the additional assistance of the Court by providing as much information as possible comparing the disability retirement plan with the service retirement plan, including setting forth their respective positions on how the Order should read and the reasons therefore.

FACTS

Husband and wife married on September 28, 1985, and divorced on October 12, 1995, thereby concluding a marriage of slightly more than ten (10) years. At the time of the divorce, husband was forty-one (41) years of age and wife was almost forty-three (43) years of age. At the time of the divorce, husband had been an employee of the State of Maryland and was entitled to benefits under the Maryland State pension system. In concluding the property matters related to their divorce, the parties each signed a "Stipulation and Order — Ancillary" which was then signed shortly thereafter by a Judge of the Family Court on March 24, 1997. Paragraph Two (2) of the "Stipulation and Order — Ancillary" contained the following relevant language:

"Petitioner [wife] shall receive her interest in the pension and/or retirement benefits of respondent [husband] pursuant to the entry of a Qualified Domestic Relations Order applying the Cooper formula with a fifty percent (50%) multiplier."

Subsequently on October 20, 1997, the parties signed and submitted a "Stipulated Domestic Relations Order" which the parties believed would carry out the terms of their previously adopted "Stipulation and Order — Ancillary". This first attempt by the parties to enter into an Order that would be accepted by the State of Maryland failed. By letter from the State Retirement and Pension System of Maryland dated November 19, 1997, the parties were advised that the Stipulated Domestic Relations Order that they had signed on October 20, 1997 was rejected by the State of Maryland because it did not comport with certain requirements set forth in Maryland's regulations. Had there not been a change of circumstances, the parties would most likely have cooperated in making the changes required by the State of Maryland. It should be briefly mentioned at this point, that the State of Maryland letter of November 19, 1997 specifically stated "ERISA does not apply to public pensions." This "ERISA" statement will be looked at in more detail later in this Opinion.

On February 18, 1999, wife's attorney sent a new draft of a Domestic Relations Order which had been prepared by working closely with a representative from the State of Maryland Pension Plan. The husband, however, failed to respond to the wife's request that he cooperate in signing the most recently prepared "Amendment to Stipulated Domestic Relations Order."

Because of husband's lack of cooperation, wife filed a Rule To Show Cause petition on April 25, 2000. Husband's refusal to sign the Amendment became apparent in his answer to the Rule To Show Cause petition, wherein husband for the first time disclosed he was on a disability pension, when he stated the following:

"... [husband] states that subsequent to the original Ancillary Order of March 24, 1997, [husband] retired from the State of Maryland on disability and upon information and belief does not receive any pension upon retirement but only as of now, disability pension through the State of Maryland."

Husband's Memorandum of Law opposing wife's contempt action goes on to clarify this situation by stating that the husband became disabled while working for the State of Maryland after the parties had divorced, and husband then filed for his disability benefits three (3) years after the divorce. Husband's Memorandum goes on to note that he was not scheduled to retire at the time of disability, and that under his normal retirement, he would have not been eligible to retire until he was at least fifty-five (55) years of age.

LAW AND REASONING

Whether disability retirement benefits, received as a result of an injury occurring after a divorce, are properly considered retirement benefits subject to an Agreement and Order entered into between the parties at the time of the divorce, have been treated differently by various jurisdictions. The husband relies on a series of cases which hold that disability benefits are a form of a wage continuation plan and, as such, are likened to workers compensation benefits. In this line of cases, disability benefits which accrue because of a post-divorce related injury are not marital property.²

The wife relies on the logic of the several jurisdictions which hold that disability pension payments are a form of deferred compensation and therefore treat them as ordinary pension payments.³

In the case sub judice, husband benefits from the State of Maryland Pension Fund. Maryland Courts have held that disability retirement benefits, received as a result of an injury occurring after the parties' divorce, are properly considered retirement benefits pursuant to a settlement agreement between the parties, which entitled the wife to a share in the portion of her former husband's "pension and retirement benefits" if, as, and when paid to him.⁴ In the Lebac case, the Maryland Court specifically noted that the disability retirement rights were marital property because the actual contractual entitlements to these rights were acquired as part of the employment during the marriage, despite the fact that the husband eventually was disabled after the marriage.⁵ In the Fultz case, the Maryland Court stressed that the parties could never have intended that the former wife would have lost all retirement benefits simply because the former husband's retirement arose from something other than a lengthy period of service. The Maryland Court went on to say that the wife's loss of benefits could only occur if there was language specifically excluding disability benefits from the very general and encompassing phrase the parties used in their Agreement of "pension and retirement benefits."⁶

In the 1976 landmark decision of In re Marriage of Brown, Cal.Supr., 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976), California Supreme Court Justice Tobriner firmly established that pension rights, whether vested or non-vested, are contractual rights derived from the terms of the employee's contract. As such, they are a form of property. The fact that the contractual right is contingent upon a future event does not diminish that contractual right into a mere expectancy. Justice Tobriner's decision emphasized the importance that pension benefits have in marriages, often representing the most important asset of the marital property. Justice Tobriner determined that the pensioner's right was acquired by reason of the employment during the marriage, not by reason of some future contingency following the date of divorce. The only requirement for the employee becoming vested in a plan was the employee's continued employment. Justice Tobriner's decision also advanced the "if, when and as the benefits are paid" approach which has been approved for our Delaware Family Courts to follow since the case of Robert C.S. v. Barbara J.S., Del.Supr., 434 A.2d 383 (1981).

Practitioners around the country following Justice Tobriner's 1976 California decision will recall the questions and concerns the parties had in making sure that pension plans would follow the Court's Order. In some cases, attorneys would join a corporation as a third (3rd) party in the divorce action. The situation became more difficult when out-of-state pension plans were involved, and attorneys were often subject to the voluntary compliance of these out-of-state companies. Fortunately, the United States Congress passed the Retirement Equity Act of 1984 (REACT), P.L. 98-397, which became effective January 1, 1985. REACT empowered state Courts to issue a Qualified Domestic Relations Order (QDRO) pursuant to 29 U.S.C. § 1056(d)(3) to bind pension plans, in or out-of-state, and without the necessity of joining a corporation into a divorce action. However, REACT...